When hunting for a personal cash loan, lot ofpeople turn to banks first, have you ever asked when a bank willloan you money?
Banks will happily offer youa personal loan when you have NO need for it. Banks also extend creditsonly to credit worthy people. Financial institutions and banks have a great deal ofrequirements and restrictions when the yoffer personal loans.Banks do not provide personal loans to Singaporean citizens and PRs whoearn lower than $20,000 peryear. In the event that youare a foreigner in Singapore, the criteria are even tougher. What happens if you have bad credit and you are in need of an urgent personal cash loan?
Other than family members and friends , your best lawful choice is to give a try the helpof a money lender.
Loaning from relatives and/or friends are daunting and awkward. There are considerably a lotof individuals (who intends to save face) who more willinglyborrow from a licensed money lender and pay the interests on the loan than askfor a favour from someone close .
Licensed Money Lenders in Singapore
In Singapore (as with roughly every industry) themoney lending industry is closelyregulated and moneylenders are licensed by the Registrar of Money Lenders. There are very clear guidelines and restrictions on the amount ofloans they can offer, the fees they can charge and even the interest rates areheavily regulated.
Any licensed moneylender found to be flouting the Money Lenders Act in Singapore will havetheir money lending licensed called back. It ishighly recommended that you areaware and figure out your right as a borrower if you are wishing to apply for a personal cashloan from a licensed money lender.
It is definitely worth noting that a licensedmoney lender in Singapore is really a lot like any otherbusinessman. They would like to take care of their good credibility andreputation, offer a wonderful service, tailor their loans in conformance to the laws and make money. When licensed money lenders inSingapore “chase” their debtors, they are no different to a bank– it’s letters andletters and more reminder letters.
What should you do before talking to a licensedmoney lender?
Remember that you are legally obligated to fulfil any loan contracts you enter with a licensed money lender. It is recommended to borrow only what you can pay back.In Singapore, all licensed money lenders are expected by law to spell out theterms of loans to you clearly and in a language that you understand. You areprotected by law to get a copy of the contract. Always be surethat you understand all the terms of the contract which involves crucial terms such as the interest rates, applicable fees involved and the repayment terms.
How much money can you borrow?
For secured loans, there is no limit to the loan you can secure. For unsecured loans, theamount you can borrow depends on yourannual income:
You can borrow up to $3,000, if your yearly salary is less than $20,000;
You can borrow as much as 2 months’ income, if your yearly salary is $20,000 or more but no more than $30,000;
You can borrow as much as 4 months’ income, if your annual paycheck is $30,000 or more but no more than $120,000; and
You can borrow up any amount, if your yearly netincome is $120,000 or more.
Interest Rates That Moneylenders can charge
For loans contracted between 1 June 2012 and 30 September 2015, moneylenders are required to calculate anddisclose to you the Effective Interest Rate of the loan, beforethe loan is offered. If your yearly income is below $30,000, theinterest rate which moneylenders can charge, for both secured and unsecured loans, iscapped at:
13 per cent Effective Interest Rate for secured loans; and
20 per cent Effective Interest Rate for unsecured loans.
The Effective Interest Rate takes into consideration thecompounding effect of the number of instalments over a one-yearperiod. This means that Effective Interest Rate better demonstrates the true cost of borrowing over a one-year period. Visit https://www.mlaw.gov.sg/content/rom to discover more about how the Effective Interest Rate is calculated from 1 June 2012.
Assuming that your yearly paycheck is $30,000 or more , the caps above are not applied and interest rate is to be concededupon between the moneylender and the borrower.
With effect from 1 October 2015, the maximum interest rate moneylenders can charge is 4%per month. This cap applies irrespective the borrower’s income and whether the loan is an unsecured or secured one.If a borrower fails to repay the loan timely, the maximum rate of late interest a moneylender can chargeis 4% per month for each month the loan is repaid late.
The computation of interest charged on the loan must be based onthe amount of principal remaining after deducting from theoriginal principal the total payments made by or on behalf of theborrower which are appropriated to principal. [To clarify, if X takesa loan of $10,000, and X has repaid $4,000, only the remaining $6,000 can be taken intoaccount for the calculation ofinterest.]
The late interest can only be charged on an amount that is repaid late. Themoneylender can not charge on amounts that are unsettled but not yet due to be repaid. [To illustrate, if X takes aloan of $10,000, and forgets to pay for the first instalment of $2,000, themoneylender may charge the late interest on $2,000 but not on the remaining $8,000 as itis not due yet.]
Banks VS Licensed Money Lenders
Key differences between banks and money lenders consist of:
Licensed money lenders supply a smaller loan amount compared with banks
Licensed money lenders provide loans at a higher interest rate than banks(to price in the credit risk involved).
Licensed money lenders offer loans to individuals with bad credit rating.
Licensed money lenders offer prompt personal loans turnaround time (can be as fast as a few hours).
Although the legal restriction is 2– 4 times the borrower’s monthly income, most licensedmoney lenders do not offer such a high amount . They normally offersmall loans to borrowers (well below the legal limit). As with allbusinesses, licensed money lenders compete on efficiency, with all theright paperwork available, it is even a possibility for a moneylender to provide the cashloan within 1 hour.
What happens if you can not repay the loans toyour money lender?
Licensed money lenders are regulated by the law. If they do not observe the guidelines, their money lending license could be revoked. Similar to banks, be preparedto get letters, SMSes and telephone calls if you can not repay your loans. Unlike loansharks, they can not harass you or intimidate you. However in some cases, if you can not repay your loan, they do have the right to send out a debt collector to your house.
Be mindful of Advertisements From Unlicensed or IllegalMoney Lenders.
Legal and Licensed Money Lenders in Singapore are regulated by law and onlyallowed to advertise through the following channels:.
The licensed moneylender’s own website.
Advertisements (offline) placed physically within the business premises of themoneylender’s location or exterior of the money lender’s business premises.
Consumers or Business Directories in online or print (offline) format.
If you receive or see an advertisement that does not fall in any of the guidelinesabove, for example in the form ofSMS, email or all other form except thestated above, please report to the Singapore Police Force or Ministry of Law.